CANADA: PM Convenes Canada-US Economic Summit For 7 Feb Following Tariff Pause
Prime Minister Justin Trudeau has announced a Canada-US Economic Summit to take place in Toronto on Friday 7 February. In a press release, the PM's office said the summit will look to expand the work of the newly formed Council on Canada-US Relations and include leaders from trade, business, public policy, and organised labour. "Using their sectoral expertise, the leaders will explore ways to grow Canada’s economy, make it easier to build and trade within the country, diversify export markets, and rejuvenate productivity. The Summit will see increased co-ordination, co-operation, and interoperability between partners, including through issue- and sector-specific conversations."
- It would appear that rather than being a summit for Canadian and US business and political figures to meet, it will focus on boosting domestic investment and identifying potential markets for Canadian goods other than the United States.
- After threatening the imposition of 25% tariffs on Canadian (and Mexican) imports, US President Donald Trump agreed to pause these measures on 3 Feb after commitments from Ottawa and Mexico City regarding border security and the flow of illegal narcotics. The pause is in place for 30 days and will allow for further negotiations.
- The increasingly bitter spat between the erstwhile allies has sparked a high-profile 'buy Canadian' campaign in some outlets.
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CROSS ASSET: Trump Denies Watering Down Of Tariffs, USD Bid, Stocks & Bons Sold
Some of the late London morning moves reverse as Donald Trump posts the following on Truth Social: "The story in the Washington Post, quoting so-called anonymous sources, which don't exist, incorrectly states that my tariff policy will be pared back. That is wrong. The Washington Post knows it's wrong. It's just another example of Fake News."
- The BBDXY recovers just over 50% of the losses seen following the Washington Post Story.
- Tsy yields now flat to 2bp higher on the day, curve steeper.
- Euro Stoxx 50 futures pare nearly all of their Washington Post-inspired rally before stabilising.
EQUITIES: US Cash Opening calls
SPX: 5,991.8 (+0.8%); DJIA: 42,923 (+0.4%/+190pts); NDX: 21,556.7 (+1.1%).
FED: Cook Echoes Cautious Cutting Rhetoric
- Gov. Cook (permanent voter) wrote in prepared remarks that the Fed can “proceed more cautiously with further cuts”.
- Her comments echo other cautious remarks from Daly and Kugler over the weekend plus Barkin on Friday, following the 100bp of cuts seen in 2024.
- “I continue to view the risks to achieving the two sides of the Federal Reserve's dual mandate of price stability and maximum employment as being roughly in balance. Over time, I still think it will likely be appropriate to move the policy rate toward a more neutral stance. However, the 100 basis points of rate cuts since September have notably reduced the restrictiveness of monetary policy. All along, I envisioned moving more quickly in the early stages of our easing campaign and then easing more gradually as the policy rate came closer to neutral. In addition, since September, the labor market has been somewhat more resilient, while inflation has been stickier than I assumed at that time.”
- She still thinks it’s appropriate to cut toward neutral over time, repeating the stance she last shared in November.
- The impact from her remarks is clouded by President-elect Trump rowing back on the Washington Post story around a potentially more targeted tariff approach.
